News & Views

11/03/19

Alcohol tax hike to raise P237-B in revenues over 5-year period

A proposal by Sen. Emmanuel Pacquaio to increase the excise tax on alcohol products will raise additional revenues of almost P237 billion over a five-year period and at the same time help reduce excessive consumption of alcoholic drinks or binge drinking that is linked to vehicular crash accidents, domestic abuse and other crimes.

Finance Undersecretary Karl Kendrick Chua said that like the proposed hike in cigarette taxes, increasing the excise tax levied on alcohol products will help close the P40 billion funding gap in the universal health care (UHC) program.

Pacquiao’s Senate Bill (SB) No. 2197 will raise around P32.3 billion in the first year of its implementation in 2019, P40 billion in 2020, P47.4 billion in 2021, P54.6 billion in 2022 and P62.4 billion in 2023, for a total of P236.6 billion, Chua said.

In endorsing the senator’s bill, Chua said computations done by the DOF’s Strategy, Economics and Results Group (SERG) show that the inflationary impact of increasing the excise tax on alcohol products under the measure would only be 0.1 percentage points.

“If inflation is, let’s say, 3.2 percent this year as the Bangko Sentral ng Pilipinas (BSP) projects, then the additional inflation will be 0.1, so 3.3 percent,” Chua said during a recent hearing conducted by the Senate ways and means committee on the proposal to increase alcohol excise taxes.

Health Undersecretary Rolando Domingo said at the same Senate hearing held before the adjournment of session last month that higher alcohol excise taxes would help curb binge drinking, which often leads to vehicular accidents and the commission of crimes.

Pacquiao, who has also filed a bill increasing the excise tax on tobacco products, said the World Health Organization (WHO) has identified alcohol as being “responsible for 1 in 20 deaths.”

The senator also said “that the cause of more than 200 health conditions, numerous cases of sexual and drug abuse, suicide, violence, and accidents are linked to alcohol intoxication.”

Citing Department of Health (DOH) data, Pacquiao said “there were 2,690 transport and vehicular crash-related injuries that were alcohol-related” in 2015.

“There has been countless debates on the positive and harmful effects of alcohol. However, unlike tobacco smoking, excessive alcohol intake affects the mind. It affects judgment. These mindless judgments have affected the lives of countless people: including women, children, and the elderly. Will we allow people to continue these mindless actions?” said Pacquiao in seeking the swift approval of SB 2197 before the committee chaired by Sen. Sonny Angara.

Pacquiao said the full implementation of the UHC program requires continuous funding, which can be sourced from the incremental revenues to be collected by the government via the adoption of his proposal to impose higher taxes on alcohol and tobacco products.

“By increasing the tax on alcohol, along with tobacco, we can help the government raise funds that will ultimately benefit all our citizens. This would bring far greater good to our countrymen compared to whatever benefits alcohol may have to some consumers,” he said.

Aside from increasing excise taxes on alcohol products, Pacquiao’s bill also seeks to further hike the tax rates by 10 percent annually to account for inflation and income.

The bill also removes the distinction on whether fermented liquors are brewed and sold in microbreweries and pubs or in factories for simpler tax administration.

Under SB 2197, an ad valorem tax equivalent to 25 percent of the net retail price (excluding the VAT and excise tax) per proof and a specific tax of P40 per proof liter will be imposed on distilled spirits starting 2019. The specific tax will increase by P5 per proof liter every year thereafter until 2022. Starting 2023, the specific tax will be increased by 10 percent every year.

Pacquiao’s bill also proposes a tax on sparkling wines and champagne of P335 for those costing P500 or less per 750 ml bottle and P937 for those costing more than P500. Still wines and carbonated wines containing 14 percent alcohol or less will be taxed P40 per bottle, while those with more than 14 percent but not more than 25 percent alcohol by volume, will be taxed P80. The tax rates for wines will increase by 10 percent every year thereafter effective 2020.

Fortified wines containing more than 25 percent of alcohol by volume will be taxed as distilled spirits.

For fermented liquors, the tax shall be P40 per liter, regardless of where they are sold or manufactured in 2019, and will increase by P5 per liter until 2022. The tax rates will then be increased by 10 percent every year thereafter under the Pacquiao bill.